The peso advances against the dollar at 20.04

The peso starts the session with an appreciation of 0.54%, trading around 20.04 pesos per dollar after hitting a low of 20.0114 pesos.

The peso continues to gain ground along with most currencies amid a clear increase in risk appetite in global financial markets.

This is because in the United States the General Services Administration (GSA) recognized Joe Biden as the apparent winner of the presidential elections, after Michigan confirmed Biden’s victory in the state.

President Donald Trump, while still arguing fraud, asked his agencies to cooperate in the transition of the administration in the best interest of the country.

Recognition by the GSA triggers a formal transition process, giving Biden and his team access to government resources, including information books and a $ 6 million funding fund.

The foregoing, in short, generates certainty among market participants, which tends to increase the appetite for risk.

In the broad basket of main crosses, the Mexican peso is the tenth most appreciated currency, with the currencies with the greatest advance being the New Zealand dollar (+ 0.75%), the Australian dollar (+ 0.69%), the Norwegian krone (+ 0.44%) and the Czech crown (+0.35 percent).

In contrast, few currencies lose ground, standing out the Turkish lira (-0.82%), the Swiss franc (-0.04%) and the Japanese yen (-0.03 percent).

The peso and the pandemic

In the capital markets, gains are observed in Europe, with the main indices advancing close to 1.20% on average, while in the United States the futures market points to gains close to 1.00% for the Dow Jones and 0.80% for the S&P 500, while the Nasdaq shows an advance of only 0.30 percent.

This is a sign of optimism mainly for companies considered cyclical, so the capital market gains are also due to optimism associated with the likely availability of a coronavirus vaccine in the coming months.

The optimism of the markets remains fragile, because in the short term the coronavirus continues to advance and several governments at a global level continue to implement new containment measures, which already began to be reflected in the economic performance of Europe in November and probably also see reflected in the US economy in December.

Los Angeles is now the metropolitan city with the most Covid-19 infections in the United States, so the authorities tightened the restrictions.

Starting tomorrow, restaurants and bars should limit their services to take out orders, and the curfew will continue from 10 pm to 6 am for all non-essential businesses.

In Asia, the Hong Kong authorities reported that as of Thursday bars and nightclubs will have to remain closed, given the increase in cases of coronavirus.

In addition, the government asked employers to allow work from home, as an additional measure to try to stop the infections.

Europe

In the United Kingdom, Prime Minister Boris Johnson reported that the partial confinement that is in force in his country will expire on December 2.

However, it will be replaced by a stricter system of regional restrictions, designed to last until spring 2021.

Under the new measures, stores and gyms will reopen, but bars and restaurants will remain with take-out service only, in areas with the highest restrictions.

Prices

Regarding economic indicators, in Mexico inflation for the first half of November registered a fortnightly increase of 0.04%, representing the smallest increase for the same period since the series began.

At a year-on-year rate, inflation was 3.43%, after being above 4% in four of the last six fortnights and close to 4% in the other two.

The foregoing was the result of the biweekly decline of the underlying component by 0.11%, being the first negative variation on record for the same fortnight, where non-food merchandise showed a negative annual variation of 0.69 percent.

It is worth mentioning that, in the last four days of the fortnight, the Good End was held, unlike other years that begins during the second half of the month, which contributed to the negative biweekly variation in this period in non-food merchandise . In annual terms, the underlying component was 3.68 percent.

On the other hand, the non-core component registered a fortnightly increase of 0.51% and interannual of 2.67%, given the negative fortnightly variation in the price of fruits and vegetables of 3.28 percent.

The energy component registered a biweekly increase of 2.39%, pressured by the biweekly increase of 22.74% in electric power rates.

Job positions

For its part, INEGI published the results of the National Occupation and Employment Survey for the month of October.

During the month, 1.9 million jobs were created, bringing the employed population from 51.1 million to 53.0 million people, while the unemployed population decreased from 2.7 to 2.6 million, leaving an unemployment rate of 4.7 percent.

Of the 12.5 million jobs lost in April, 9.7 million have been recovered, or 78%, and 2.8 million jobs would be needed to reach the April level.

The Non-Economically Active Population available, the one that does not work or look for work, but would accept one if offered, decreased by 1.6 million in October to stand at a total of 8.9 million.

This figure went from 5.9 million to 20 million during April, as most of the people who lost their jobs left the PEA to find themselves within the available PNEA.

Indicators of Banxico

Finally, the underemployed population, those with jobs but who have the need and willingness to offer more hours of work, decreased by only 0.1 million, at a slower rate than in previous months, and stands at 7.9 million, which is equivalent to at an underemployment rate of 15%, still well above the 9.1% observed in March.

During the session, the exchange rate is expected to trade between 19.92 and 20.12 pesos per dollar. The euro starts the session with an appreciation of 0.23%, trading at 1.1868 dollars per euro, while the pound shows an appreciation of 0.08% and is trading at 1.3331 dollars per pound.

Money market and debt

In the United States, the 10-year Treasury bond yield increased by 1.8 basis points, at a rate of 0.87%, while in Mexico the 10-year M bond yield remained unchanged at 5.88 percent.

The peso and the derivatives market

To hedge against a depreciation of the peso beyond 20.50 pesos per dollar, a purchase option (call), with an exercise date within 1 month has a premium of 1.58% and represents the right but not the obligation to buy dollars in the aforementioned level.

On the other hand, the interbank forward for sale is at 20.1531 at 1 month, 20.4895 at 6 months and 20.9460 pesos per dollar at one year.

 

Gabriela Siller; PhD

Director of Economic-Financial Analysis.

Banco BASE